Successfully negotiating claims since 1867
We have just resolved in our client’s favour a dispute centring on Part 4A of the Insurance Act 2015. That’s the section that gives a right of action should insurers unreasonably withhold payment.
The wording of the relevant section is admirably and unambiguously clear: It is an implied term of every contract of insurance that if the insured makes a claim under the contract, the insurer must pay any sums due in respect of the claim within a reasonable time.
It applies to every insurance, to any sums due, and timely payment is a must.
Our client had a claim of several hundred thousand pounds. Early in 2019 the underwriters offered a few hundred pounds over £25,000 in full and final settlement. It was agreed between us and the underwriters’ adjuster that significant six-digit additional costs were yet to be incurred and that establishing them for a final settlement could be a lengthy process.
We agreed to take £25,000 – less than the sum offered – as an interim payment, pending settlement negotiations. Underwriters insisted they wouldn’t pay it until there was a final agreement with a full discharge. They pleaded that the interim sum was not “due” as specified in the Act, because the parties each attributed a different character to it.
Our argument was that money became “due” when both parties acknowledged that the underwriters had an obligation to pay and that the policyholder had a right to receive it. Both we and underwriters did so acknowledge and the character and function of the payment did nothing to overturn the imperative to pay.
We also pointed out that the inclusion of Part 4A in the Insurance Act was specifically to eliminate the sort of abusive behaviour that insurers had in the past perpetrated, of which the case in dispute was a stereotypical example. Underwriters dug in and refused to pay, knowing that it could yet be up to a year before final figures could be established.
We were forced to file a formal complaint which ended up with Lloyd’s Complaints. Their decision against underwriters was quite clear: the character of a payment offered did not prevent it from being due. The obligation to pay within a reasonable time applies to any amount the insurer acknowledges to be payable. This gives policyholders the right to claim and receive quick payment for all covered costs proved to have been incurred.
By the time the £25,000 had had statutory interest and damages for maladministration added, the payment award had risen to almost £27,000.
This is a disturbing case. The legislated duties are set out with great clarity. But some insurers – and we stress that it is in our experience a minority – will still try to find any excuse to seriously disadvantage the policyholder, conduct that breaches the obligation to treat the policyholder fairly and reasonably.
It’s our job at Thompson and Bryan to make sure they don’t get away with it.